In Smithfield, Rhode Island, bankruptcy is a judicial process in which the debts of a person or business can be absolved or restructured. This allows the debtor to climb out of a financial hole, and move on with a clean slate, which is sometimes more economically proficient than requiring the debtor to pay off everything they owe. Of course, one should never view bankruptcy as a "get out of debt free" card, allowing someone to be relieved of their obligation to pay their debts just because they don't want to. It is meant to serve as a lifeline, preventing unmanageable debt from resulting in complete financial ruin. Accordingly, it is best treated as an option of last resort, because it can carry with it significant negative consequences, which must be weighed against the possible benefits. For example, filing for bankruptcy can severely damage a person's credit rating.
Accordingly, it might be a good idea to consult with a Smithfield, Rhode Island bankruptcy attorney. Your lawyer will be able to counsel you about your options, including alternatives to bankruptcy, if such alternatives exist in your case. Whatever the result, it is often difficult to foresee the long-term consequences of any bankruptcy-related decisions, so the advice of a bankruptcy in Smithfield could prove invaluable.
Types of Bankruptcy in Smithfield, Rhode Island
In Smithfield, Rhode Island, there are three basic bankruptcy schemes that are most commonly used. They are known as Chapter 7, Chapter 13, and Chapter 11. Being a product of federal law, the procedural rules governing bankruptcy in Smithfield, Rhode Island will be very similar to those in any other part of the United States. Chapter 7 bankruptcy, or "liquidation," requires the debtor to sell some of his or her property to the highest bidder, and using the proceeds from the sale to pay down as much debt as possible. Once the sale is complete, all dischargeable debt is deemed paid in full, whether or not the sale was able to raise the entire amount owed. You should note that some property (usually the types of property deemed essential) is fully or partially exempt from liquidation, meaning that the debtor gets to keep it. This includes houses, cars, and retirement accounts, among others. Some types of debts, however, cannot be discharged in bankruptcy, including taxes, child support, and student loans.
The other recognized bankruptcy scheme used by consumers in Smithfield is Chapter 13 bankruptcy. In this system, debt is not discharged. Instead, it is restructured. This allows the debtor to have the terms of the agreements that gave rise to their debts in the first place thrown out, and replaced with new terms that call for a structured repayment plan, designed to allow the debtor to survive on whatever income they have, and allowing the creditors to get paid back eventually. Once a payment plan is approved, creditors are not allowed to attempt to collect payment under the original agreements. Chapter 11 bankruptcy is primarily used by businesses, though it can be used by individuals (which is quite rare). Chapter 11 bankruptcy requires that the debtor come up with a reorganization plan - essentially telling the court how they propose to cut costs, streamline their operations, and pay their debts. This plan must be approved by the participating creditors through a simple majority vote.
A main advantage of Chapter 11 bankruptcy is that businesses can continue their operations while going through the process. Also, they can continue to buy and sell their stock.
How Can a Smithfield Bankruptcy Lawyer Help?
One should not make the decision to file for bankruptcy in Smithfield lightly. Before making any such decision, it would be highly advisable to contact an experienced Smithfield bankruptcy attorney.